No Claim Bonus in Health Insurance Policies – An Analysis

No-claim bonuses have featured in the motor insurance sector for a long time and quite successfully too. It simply encourages people to drive cautiously and hold-back from making petty insurance claims. This concept works well in regard to motor insurance, but when applied to the health insurance sector, it doesn’t roll out quite as simply. This is because a health insurance claim differs greatly from a motor insurance claim as in the former the lives and well being of people are in question. So though similar, there are some very basic differences between the no claim bonuses of motor and health insurance. Read this article and find a clear analysis of the no claim bonus in health insurance.

What is a no claim bonus? In a health insurance policy, when a renewal is made without any claims in the preceding period of the policy, the insurer offers a bonus to the policyholder. This bonus is usually in the form of a discount in the premium. In rare cases, the bonus amount may also be added to the sum assured at a pre-decided rate. However, more commonly, the bonus is offered as a discount on the premium, 5% for every claim- free year. The bonus can go up to 50%, provided no claim is made for 10 consecutive years.

Understanding the bonus Though the no claim bonus sounds quite attractive, it is not always a practical feature. It is good for a healthy person who has taken a mediclaim policy for emergency situations. He or she usually doesn’t have to make small claims at regular intervals and so can enjoy the no claim bonus. However, for a person suffering from a chronic disease or old-age related illnesses, the no claim bonus is almost never applicable. If he or she needs regular hospitalization or medical tests, claims have to be made. People buy expensive mediclaim policies to shield them from rising medical costs and so discouraging them from making claims is never a good idea. This defeats the entire idea of purchasing a health insurance policy.

When to make a claim Much like in motor insurance, you need to assess the cost of treatment and compare it with the bonus amount to understand whether it would be wise to make a claim or not. If you need to get an endoscopy for Rs.2000, think before you make a claim for it. Calculate the no claim bonus you are eligible for. If the bonus amount exceeds Rs.2000, it would be wiser to pay for the test yourself and then make a profit when the bonus arrives. This practice however is not recommended for people who are seriously ill and need urgent, expensive treatment. Experts often criticize the no claim bonus as patients hold back from making claims even after expensive treatments, just in anticipation of the bonus.

No claim bonus in health insurance policies can be an exciting feature, but you must know all the terms and conditions associated with it. The IRDA has now made it compulsory for all insurance companies to explicitly state the clauses under which the bonus can be dispatched or held back. So before you purchase the policy, get all the information so that you know exactly how and when you will be eligible for the no claim bonus.